Thursday, January 20, 2011

Consolidation, Continuation Down or Reversal Back Up?

I am very confident that we will see a move back up to retest the highs, the question is when that will happen?

Option 1: we have a choppy consolidation day today that may see a high up to the 50% retracement of yesterday's sell-off (1285 on the ES) before selling back down to yesterday's low (1275 ES).

Option 2: we continue down to fill the gap from 1/11 (1270 ES) and potentially move as far down as 1265 before finding support. I like this scenario and am a buyer at 1265-1266 in anticipation of a move back above 1290.

Option 3: selling pressure continues and we see an eventual break of the 1265-1270 support and trade down to 1250.

Option 4: the bulls step up and we see a quick reversal back up to recover all of yesterday's losses. I think this is very unlikely to happen today, but just listed it as a possibility.

Levels to watch today on the ES (E-mini S&P futures):
Resistance above at: 1285, 1290, 1295
Support below at: 1273-1274, 1269-1270, 1265, 1260, 1256
Posted by Verde at 8:24 AM
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9 comments:

  1. VerdeJanuary 20, 2011 at 10:59 AM

    We now officially have gap fill from 1/11 on the S&P 500. Lets see where the market is going to find support. I still like the 1265-1266 area, at the same time, there is a possibility that we continue down until gap fill dating back to Dec 31st. That would be 1252-1255. Any longs today will begin as scalp plays to build up enough to cover a stop for the swing long position

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  2. VerdeJanuary 20, 2011 at 11:42 AM

    If ES does find support in the mid 1260s and closes the day back above yesterday's close, my idea that we could retest the highs in the next few days will hold weight. If ES closes today in the 1260s, that will lead me to believe there is further downside...

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  3. VerdeJanuary 20, 2011 at 12:47 PM

    Looking to get Short ES between 1275 and 1277. Will be looking for at least 5 points on this trade

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  4. VerdeJanuary 20, 2011 at 1:19 PM

    Break even stop now on any shorts

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  5. VerdeJanuary 20, 2011 at 2:01 PM

    Consider new short at 1277-1278... Beware of bullish behavior. No defense on shorts... Not getting long yet, we'll see how the day closes b4 entering the long that we will ride back up to 1290 and/or above

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  6. VerdeJanuary 20, 2011 at 2:50 PM

    Lets see how many more buyers can be lured in here before it sells off in the last hour... Not short yet...

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  7. VerdeJanuary 20, 2011 at 2:53 PM

    As long as we don't see a confirmed move above 1281-1282, I will be looking for a sell-off of at least 5 points in the last hour, possibly 10 points...

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  8. VerdeJanuary 20, 2011 at 4:02 PM

    The close today on the S&P 500 supports the case to expect a retest back up above 1290 (ES)... We may see it tomorrow... Bullish bias heading into tomorrow's trading...

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  9. VerdeJanuary 20, 2011 at 4:25 PM

    After a closer look at several charts, today's close doesn't quite confirm continued upside movement will follow. However, it is more or less a 50/50 call at the moment from a technical perspective. But markets don't usually give you a clear-cut signal. A good technical close should always cast doubt on an analyst. In this case though, I'm going with my view that we will see an up day tomorrow and whether or not we get to 1290 tomorrow or next week is not important. What is important is that we will get there... imo of course

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